Modern sales teams operate in a digital environment, which means there is data everywhere that can be captured, measured, and analyzed to help focus activity in the areas where it is most impactful and even help identify potential new customers and revenue streams. Here are six important KPIs to make sure you’re getting the most from your sales performance data.
Close Rate (or Ratio)
This is a classic, easy-to-measure KPI for any sales department: (Number of Quotes sent to Qualified Prospects/Prospects who converted) x 100 = Close Rate. But stopping at this aggregate view won’t give you actionable insights, it simply shows how successful the team is overall.
Take it one step deeper by looking at Close Rate by key factors such as sales rep, industry, and source to give you insight into top and bottom performers. This information can help you identify potential areas for focus or improvement.
For example, if salesperson A has a close rate 3x higher than any other salesperson, could you work to identify what methods salesperson A is using in order to train the rest of the team? Conversely, if you can see that you never seem to close any deals sourced through a particular channel, is it worth the time and financial resources spent on developing that channel? Or perhaps adjusting the methodology used for that channel could change the rate of close.
Lead Conversion Rate
Sales and marketing KPIs are deeply linked, and the conversion of leads into the sales funnel is the major crossover point: (# of Sales/# of Leads) X 100 = Lead Conversion Rate. Similar to other metrics, it’s important to not only focus on your lead conversion rate as an aggregate of all activity, but to also look at individual markers within.
Conversion rate by source, date activated, or even product can tell you a lot about the success rate of different marketing activities helping hone those activities that are most successful and watch the impact of modifications to less successful channels.
Diving deep into the marketing funnel to view the lead acquisition date to conversion data based on various sources can also identify any unforeseen seasonality in your lead acquisition cycle.
Customer Acquisition Cost
As the name suggests, customer acquisition cost (CAC) is a metric that represents the cost of converting a prospect or convincing a potential customer to become an actual customer: (Cost of Sales + Cost of Marketing / # of New Customers Acquired = Customer Acquisition Cost.
Lowering your CAC means that your business is spending money more efficiency and should see higher returns in its total profit. If you’re unsatisfied with your current CAC but aren’t sure how to drive it down, start by looking at additional metrics such as Cost of Lead Acquisition by Source, Lead-to-Marketing Qualified Lead Ratio, and Time to Close by Source/Market Segment/Product Type.
Customer Lifetime Value
Continuing the theme of KPIs that are useful to teams outside sales, such as marketing and customer success, Customer Lifetime Value (CLV) is used to calculate the total amount of revenue that your business can expect from a single customer account: Average Value of a Purchase X # of Yearly Purchases X Average Length of Customer Relationships = Customer Lifetime Value.
By comparing Customer Lifetime Value to Customer Acquisition Cost, you can determine if the customers you’re acquiring will ultimately contribute more revenue than they cost. And, similar to the other KPIs we’ve discussed, you can further analyze LTV/CAC by looking at additional metrics such as channel/campaign type, segment size/geography, etc. to unlock deeper profitability insights.
Average Sales Cycle Length
In addition to measuring the effectiveness of your sales strategy, tracking this KPI helps you introduce predictability into your sales forecasting: Total # of Days for All Sales Combined / # of Deals Won = # of Days for Average Sales Cycle.
You can also use this KPI to assist with individual sales: for example, if a deal is far behind your company’s Average Sales Cycle Length, you can assign a sales rep to follow up on that lead and extend offers such as a free trial or special discounts.
If you’d like to monitor changes in Average Sales Cycle month-over-month, week-over-week, or even day-over-day but don’t have time to keep crunching the numbers, a digital tool such as a KPI Dashboard can automate sales cycle calculations and let you view your most important metrics at a glance.
Net Promoter Score
While typically thought of in a customer success/experience context, Net Promoter Score is also incredibly useful for sales teams. By regularly (every 3-6 months) surveying your customers to ask, “How likely is it that you would recommend our company/product to a friend or colleague?” you can determine who is a Promoter (9-10 score), a Passive (7-8 score), or a Detractor (0-6 score). % of Promoters – # of Promoters = Overall Net Promoter Score.
Consider the benefit of lead scoring if you could assess similar attributes that a lead has in common with existing Promoters of your brand. Additionally, following up to learn the specific pain points of Detractors can help prepare your team for potential complaints or product issues that might come up on sales calls. Detractors can also give you insight into which kinds of prospect are most likely to drive down LTV and drain ongoing support resources.
Hopefully our explanation of these essential sales team KPIs has given you some inspiration and ideas as to how you can optimize your existing sales process to produce more revenue.